The Court of Justice of the European Union (CJEU) has confirmed that any clause protecting an anchor tenant from competition in a new development should be analysed as to their effect on competition in the local market under EU competition law.
Maxima Latvija, a Latvian supermarket, had entered into a number of commercial lease agreements with certain shopping centres to be the anchor tenant. A number of these agreements contained a clause that restricted the shopping centres from leasing premises to any of the supermarket’s competitors without obtaining the prior permission of the supermarket. The Latvian competition authority considered that this clause had the object of distorting competition and imposed a fine on the supermarket of 25,000 LVL (approximately £26,700). The supermarket challenged the penalty before a regional court and this case eventually rose to the Latvian Supreme Court that referred a number of questions to the CJEU for clarification.
The CJEU clarified that the mere existence of such a clause did not make the agreement anti-competitive by its very nature (by object). However, such agreements could still be anti-competitive and incur financial penalties, if it is demonstrated that the effect of the agreements was to distort, restrict or prevent competition in the market.
Anti-competitive 'by object'
The Latvian competition authority concluded that the presence of such a clause in a commercial lease agreement meant that the ‘object’ or purpose of that agreement was to restrict competition. When an agreement is found to be anti-competitive ‘by object’ there is no requirement on the authority to analyse the agreement’s effect on competition in the relevant market.
The CJEU clarified that a 'by object' categorisation needs to be considered restrictively. Only those agreements which, by their very nature, expose a sufficient degree of harm to competition in their markets should be so considered. The most prominent instances would be agreements that establish collusive behaviour between competitor companies where the competitors agree to, for example, fix prices for their products to ensure that they enjoy a certain level of profit.
The CJEU ruled that the mere existence of this clause in the agreements did not result in the entire agreements having an anti-competitive object.
Anti-competitive 'by effect'
The CJEU noted that the commercial lease agreements could still be anti-competitive if it is demonstrated that such a clause had the effect of preventing, restricting or distorting competition in the market to an appreciable extent.
The CJEU ruled that anti-competitive effects would need to be determined by the national court by a thorough analysis of the economic and legal context to assess if the market was being closed off to existing or potential competitors. The CJEU held that the national court's analysis would necessarily need to consider whether there is a network of such agreements and whether cumulatively these agreements have an appreciable foreclosing effect. In addition, the national court should consider the extent of the contribution of each agreement to that closing-off effect which will depend on the position of the contracting parties on that market; the duration of the agreement; the availability and accessibility of commercial land in the area; the number and size of operators on the market; and customer fidelity to existing brands and consumer habits.